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Adaptive vs. eductive learning: Theory and evidence

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  • Bao, Te
  • Duffy, John

    (Groningen University)

Abstract

Adaptive learning and eductive learning are two widely used ways of modeling learning behavior in macroeconomics. Both approaches yield restrictions on model parameters under which agents are able to learn a rational expectation equilibrium (REE) but these restrictions do not always overlap with one another. In this paper we report on an experiment where we exploit such differences in stability conditions under adaptive and eductive learning to investigate which learning approach provides a better description of the learning behavior of human subjects. Our results suggest that adaptive learning is a better predictor of whether a system converges to REE, while the path by which the system converges appears to be a mixture of both adaptive and eductive learning model predictions.

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File URL: http://irs.ub.rug.nl/ppn/371478731
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Bibliographic Info

Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 14002-EEF.

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Date of creation: 2014
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Handle: RePEc:dgr:rugsom:14002-eef

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  1. Hommes, C.H. & Wagener, F.O.O., 2009. "Does eductive stability imply evolutionary stability?," CeNDEF Working Papers, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance 09-10, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  2. Theo Offerman & Jan Potters & Joep Sonnemans, 2002. "Imitation and Belief Learning in an Oligopoly Experiment," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 973-997.
  3. Te Bao & John Duffy & Cars Hommes, 2012. "Learning, Forecasting and Optimizing: An Experimental Study," Tinbergen Institute Discussion Papers, Tinbergen Institute 12-015/1, Tinbergen Institute.
  4. Eizo Akiyama & Nobuyuki Hanaki & Ryuichiro Ishikawa, 2013. "It is Not Just Confusion! Strategic Uncertainty in an Experimental Asset Market," AMSE Working Papers 1340, Aix-Marseille School of Economics, Marseille, France, revised 08 Aug 2013.
  5. Heemeijer, P. & Hommes, C.H. & Sonnemans, J. & Tuinstra, J., 2006. "Price Stability and Volatility in Markets with Positive and Negative Expectations Feedback: An Experimental Investigation," CeNDEF Working Papers, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance 06-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  6. Ramon Marimon & Shyam Sunder, 1993. "Indeterminacy of equilibria in a hyperinflationary world: Experimental evidence," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 25, Department of Economics and Business, Universitat Pompeu Fabra.
  7. Bao, Te & Hommes, Cars & Sonnemans, Joep & Tuinstra, Jan, 2012. "Individual expectations, limited rationality and aggregate outcomes," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 36(8), pages 1101-1120.
  8. Ernst Fehr & Jean-Robert Tyran, 2005. "Individual Irrationality and Aggregate Outcomes," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 19(4), pages 43-66, Fall.
  9. Guesnerie, R., 1999. "Anchoring Economic Predictions in Common Knowledge," DELTA Working Papers, DELTA (Ecole normale supérieure) 1999-06, DELTA (Ecole normale supérieure).
  10. Eizo Akiyama & Nobuyuki Hanaki & Ryuchiro Ishikawa, 2012. "Effect of uncertainty about others’ rationality in experimental asset markets," AMSE Working Papers 1234, Aix-Marseille School of Economics, Marseille, France.
  11. Jean-Robert Tyran & Ernst Fehr, 2002. "Limited Rationality and Strategic Interaction - The Impact of the Strategic Environment on Nominal Inertia," University of St. Gallen Department of Economics working paper series 2002, Department of Economics, University of St. Gallen 2002-25, Department of Economics, University of St. Gallen.
  12. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, American Economic Association, vol. 85(5), pages 1313-26, December.
  13. Eizo Akiyama & Nobuyuki Hanaki & Ryuichiro Ishikawa, 2012. "Effect of Uncertainty about Others' Rationality in Experimental Asset Markets: An Experimental Analysis," Working Papers, HAL halshs-00793613, HAL.
  14. Hommes, Cars, 2011. "The heterogeneous expectations hypothesis: Some evidence from the lab," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 35(1), pages 1-24, January.
  15. Sonnemans, Joep & Hommes, Cars & Tuinstra, Jan & van de Velden, Henk, 2004. "The instability of a heterogeneous cobweb economy: a strategy experiment on expectation formation," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 54(4), pages 453-481, August.
  16. Joep Sonnemans & Jan Tuinstra, 2008. "Positive Expectations Feedback Experiments and Number Guessing Games as Models of Financial Markets," Tinbergen Institute Discussion Papers, Tinbergen Institute 08-076/1, Tinbergen Institute.
  17. Ariel Rubinstein, 2007. "Instinctive and Cognitive Reasoning: Response Times Study," Levine's Bibliography 321307000000001011, UCLA Department of Economics.
  18. Sutan, Angela & Willinger, Marc, 2009. "Guessing with negative feedback: An experiment," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 33(5), pages 1123-1133, May.
  19. John Beshears & James J. Choi & Andreas Fuster & David Laibson & Brigitte C. Madrian, 2013. "What Goes Up Must Come Down? Experimental Evidence on Intuitive Forecasting," American Economic Review, American Economic Association, American Economic Association, vol. 103(3), pages 570-74, May.
  20. John Duffy, 2008. "Macroeconomics: A Survey of Laboratory Research," Working Papers, University of Pittsburgh, Department of Economics 334, University of Pittsburgh, Department of Economics, revised Jun 2014.
  21. repec:dgr:uvatin:2012016 is not listed on IDEAS
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Cited by:
  1. George W. Evans & Roger Guesnerie & Bruce McGough, 2010. "Eductive Stability in Real Business Cycle Models," University of Oregon Economics Department Working Papers, University of Oregon Economics Department 2010-16, University of Oregon Economics Department.

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